US oil output advances to 20-year high with fracking boost

U.S. oil production climbed to the highest level in 20 years as improved drilling techniques boosted exploration across the country and reinforced a shift toward energy independence.

Output rose 0.6 percent to 7.04 million barrels a day in the week ended Jan. 11, the Energy Information Administration reported Wednesday, the highest level since January 1993. The nation met 83 percent of its energy needs in the first nine months of 2012, which would be the highest annual rate since 1991, according to EIA data.

“You are going to continue to see U.S. production growth, which is pretty exciting,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “This is going to do a lot for the economy as the trade balance improves. There’s a multiplier effect.”

Production grew at the fastest pace in U.S. history last year as horizontal drilling and hydraulic fracturing, or fracking, unlocked crude trapped in formations such as North Dakota’s Bakken shale. The state’s production of 747,000 barrels a day in October was a record high, EIA data show. The EIA is the Energy Department’s statistical arm.

Crude for February delivery rose 96 cents, or 1 percent, to $94.24 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 18. Prices are down 4.5 percent from a year earlier.

Production Gain

Nationwide output, which rose 39,000 barrels in the seven days ended Jan. 11, has climbed 18 of the past 19 weeks, according to the EIA. The U.S. will pump an average 7.32 million barrels a day this year and 7.92 million in 2014, the EIA said Jan. 8 in its monthly Short-Term Energy Outlook.

The Paris-based International Energy Agency said in November that the U.S. is on track to become the world’s largest oil producer by 2020.

Last year North Dakota overtook Ecuador, the smallest producer in the Organization of Petroleum Exporting Countries, and is closing in on Qatar, the second-smallest, which produced 750,000 barrels a day in December, according to data compiled by Bloomberg.

Perfecting Technologies

U.S. output has climbed for four years as drillers perfected technologies pioneered by Continental Resources Inc. in the Bakken. In 2004, the company completed a profitable well by pairing horizontal drilling, in which the bore travels lengthwise through the richest slice of rock, with fracking, which extracts oil and gas from shale using a high-pressure jet of sand, water and chemicals.

“Companies are still in the process of discovering what they have,” Hodge said. “This technology has changed everything.”

The Environmental Protection Agency in 2011 linked the method to groundwater pollution, raising speculation that new regulations may slow exploration. The method has also pushed U.S. natural gas production to record levels.